President Obama has repeatedly cited Medicare as proof that the Federal Government can get Health Care right.  Liberal talk radio lambastes Seniors who attend town-hall meetings in opposition to a government taker-over of health care, by pointing out that they are already on a Government program.  In Fact HR 626 and many Progressives feel current proposals are unnecessarily complex when all we really need to do is extend Medicare eligibility to all Americans.

But many of us who are in the health care profession see Medicare in a far different light.  Last year for example, when our medical group moved office locations, it took Medicare bureaucrats 9 months to acknowledge the change of address, during which time all payment for ongoing medical services were withheld.  A 15 inch thick pile of documents went back and forth to accomplish this seemingly simple goal.  Medicare conditions of participation foist hundreds of requirements upon hospitals, many are cumbersome and costly.  However, compliance is mandatory or the facility is de-listed.  Arbitrary regulations determine which services will and will not be covered, only to have subsequent administrators reverse such policies entirely and without explanation.  And as for aligning payments policies with provision of care, as of January 1st Cardiologists will see a 40% drop in reimbursement for Coronary Angiography, a change designed to limit utilization of this service by making it financially untenable for doctors to provide such care in all but the most severe conditions.  Far from a benign payer of service, Medicare and the resultant bureaucracy is a harsh and erratic task master who regulate the provision of care to a remarkable degree.

But, even ignoring all of this, there are a host of reasons why Medicare makes a very poor model to emulate for the expansion of health insurance under reform.  A recent WSJ article breaks the issue down into 10 simple points.  I will recreate them here and provide a little extra detail were it seems necessary.  The goal of this post is simple; I wish to make clear to any interested reader specifically why Medicare makes a horrible model for HCR.  After reviewing the list of reasons, I doubt many will disagree.

1. Medicare is going Bankrupt:  The Medicare Trustees estimate that under current projections Medicare will run short of money beginning in 2017.  This ignores any change in intensity that might occur outside the projections.  Over the next 50 years the program has unfunded liabilities of $38 TRILLION.  It is said to work because no one publicly addresses this issue.
2. Private Insurance is bearing the brunt of Medicare and Medicaid underpayment: In a study commissioned by Healthy Families USA (a reform advocate) and conducted by Milliman (an independent actuarial firm) chronic underpayment by Government programs (Medicare and Medicaid) represents a “Hidden Tax” on commercial payers of $89 Billion per year.    This report estimates that a family of 4 with PPO insurance pays an additional $1,788 per year to compensate for the underpayment by Government programs.   Remember when President Obama cited the Mayo Clinic as the model for efficient delivery?  Well, perhaps their views will be illuminating.  In a recent letter from a dozen leading health care systems including the Mayo Clinic they stated that “many providers suffer great financial losses associated with treating Medicare patients” and further that if these rates were expanded to patients who currently have commercial insurance the shortfall “will be unsustainable for even the nation’s most efficient, high quality providers, eventually driving them out of the market”.  Simply put, from a financial aspect further expansion is implausible.
3. Expansion of the Entitlement Programs is economically unsustainable:  The CBO acted as primary villain this summer pointing out that Congressional efforts would NOT reduce future deficits as claimed, but would in fact add to these deficits including an acceleration of the problem, “bending the cost curve” up rather than down.  With a 10 year deficit recently revised upwards from $7 trillion to $9 trillion only ideologic believers could still promoted such a course.
4. Administrative costs are much higher than advertised: As the Journal makes clear, many costs are not included in the 3% figure thrown around on Capitol Hill.  Just accounting for costs such as revenue collection and enforcement would double the quoted rate, and that compared to commercial insurance who provide the additional services such as fraud detection and chronic illness hotlines.  Further, commercial payers must pay income and property taxes which Medicare does not.  In short, by keeping many fundamental costs associated with running a business off the books, Medicare claims an administrative overhead far less than reality.
5. Medicare does a poor job of dealing with Fraud: Despite claims of massive savings by reigning in “waste, fraud and abuse” which date back to the Carter Administration, Medicare in fact does a terrible job of detecting such practices.  As any large Government program with hundreds of billions at stake, it becomes the target of criminals of all types.  The FBI estimates that between 3-10% of spending is due to fraud, a stunning number in a program worth over $400 billion annually.  Even short of fraud are outlays for “the scooter store” and other vendors of durable medical equiptment who have learned to work the regulations to their benefit.  While reviled for denial of care, private insurers do a far better job of controlling these costs.
6. Medicare provides dubious coverage for many Seniors: Under current regulations Medicare provides limited benefits in a number of circumstances.  The creation of Part D to provide prescription coverage was a very expensive initiative, yet it still exposes elder Americans to the “donut hole” where coverage ceases to apply.  Because of this, many purchase supplemental “Medigap” policies on the commercial market.
7. The model is obsolete: Medicare merely receives the claims and makes payment when all appropriate boxes are checked.  This fee for service model is branded a culprit in the escalation of total costs, and while current proposals suggest new models of delivery, the program has remained static for 40 years.  Wellness programs and health hotlines are standard practice among private payers seeking to manage outlays and improve outcomes.  Medicare has lagged behind these innovations.
8. Payments to Providers (Doctors) is too low:  When we hear mention of Medicare “negotiating” reduced prescription drug prices we have to laugh.  Medicare does NOT negotiate, it proclaims.  Over the last decade physicians have been in yearly battles with the government over the price of their services, with annual cuts scheduled under the Clinton era SGR (sustainable growth rate).  Each year the Congress places a one year fix on this formulaic decrease, never correcting the underlying issue.  As a result many providers in our community have dropped participation in the program.  In addition to the underpayment, physicians are confronted with mountains of paperwork, restrictive regulations and arbitrary denials.  The system cannot push payment rates down forever without losing doctors as a result.
9. Medical decisions in the form of payment policies are created in Washington with limited input: Doctors have for years been second guessed by the public programs just as they have by private, for profit carriers.  Payment policies are often decided by a struggle for influence between CMS officials and industry lobbyists aided by members of Congress.  Patients and physicians alike are relegated to observer status as financially motivated parties use the political process to regulate care, independent of medical necessity.
10. There is no appeal to Government agencies: While unscrupulous practices of private insurers have garnered much attention of late, one must keep in mind that with a business there is always a higher authority.  Many lawsuits have been filed and settled restricting the denials of care, bundling of payments and limitations of benefits by commercial insurers.  No such option exists to redress practices of Government entities.  Under Sovereign Immunity, governments must allow legal action to proceed, and they rarely do.  Volumes of regulations constrain those without government authority, for example one is guaranteed a 3 day hospital stay after child birth in California.  But when Medicare determines a service is not covered, there is no mechanism to challenge the decision other than intervention by Congress.

Medicare has fulfilled the promise of at least limited coverage for a generation of Seniors.  Until recently that coverage excluded prescription drugs, coverage basic to Private contracts.  There are still many limitations, but with 70 million baby boomers nearing retirement age the program is in deep actuarial trouble.  Far from a model for extension to the rest of Americans, the program has a host of structural problems in need of reform every bit as much as the private sector.  In fact, these problems have bleed into the private market exacerbating the issues there as well.  Without serious changes the program will become the largest Ponzi scheme in history, dwarfing Madoff by 1000 fold.  While Politicians may tout Medicare as a great success, much data exists to suggest it could become one of the greatest failures in American history.